1. Field of the Invention
The present invention relates to systems and methods for extracting value from a portfolio of assets.
2. Discussion of the Prior Art
A successful, growing enterprise will generally reinvest a substantial portion of its revenue on research and development activities, the principal objective of doing so being to generate a pipeline of product ideas and, ultimately, a continuing stream of marketable products. To protect the inventions, works of authorship, and know-how which arise from such activities and, thereby to secure the anticipated benefits of emerging market opportunities, a large corporation may spend tens of millions of dollars or more annually on the filing of patent applications and copyright registrations and the maintenance of issued patents.
Often, an enterprise committed to protecting its investment in research and development will accumulate a substantial number of discrete asset portfolios each potentially consisting of a number of patents, copyrighted works of authorship, and know-how corresponding to a particular product or process concept or a related family of such concepts. When a product idea is regarded as a good fit with respect to a corporation's current or target customer base, the enterprise may spend millions of dollars on further product development, manufacture, and marketing. Conversely, even if a product idea has an immediate and accessible market, an enterprise may not incur the expenses of commercialization if it is perceived as not fitting within a pre-identified “core” or strategic focus area. The corporate owner knows that if its “stranded” IP assets remain where they are their value will likely diminish over time as the associated human capital and know-how disappears and the potential patent position stagnates or declines. In such cases, the enterprise may pursue other ways of extracting value from or “monetizing” the corresponding asset portfolio. A corporation seeking to monetize some or all of its intellectual property portfolio assets has heretofore been presented with a limited set of conventional options. These options include either the outright sale of a patent or set of patents, patent licensing or a wholly-owned, Joint-Venture-(“JV”)-based or Venture-Capital-(“VC”)-financed, spin-out.
The simplest monetization alternative is an outright sale of the patent. The buyer could be a company that is already operating in the technology space represented by the patent or one that is about to enter the field, or, with increasing frequency, the buyer may be an institutional patent aggregator. The former may be characterized as a strategic buyer and the latter as a financial buyer. The purchase price can be a lump sum, either in cash, stock, or a combination of the two, or it can involve a continuing revenue stream (a “tail”) based on performance. In the latter case, the seller will usually retain a reversionary interest in the patent(s) such that if certain financial milestones are not met, ownership reverts to the seller.
If the seller is an operating company, sale of a patent may also involve retention of some rights under the patent by the seller via a reservation of rights or a grant-back license. The grant-back may be nonexclusive or, if the buyer and seller are in different fields (and the patent covers both), an exclusive license within the field of the seller's business. In either case, issues as to whether the grant-back license: a) includes sub-license rights; b) covers follow-on or improvement patents granted to the buyer; and/or c) survives change of control of the seller/licensee are important, are often contentious, and can be the subject of substantial negotiation.
Another monetization model involves the granting of one or more exclusive field-of-use licenses. Where the patent(s) cover not only the patent owner's products and markets but other applications as well, the patent owner may grant a third party an exclusive field-of-use license for all fields outside the owner's business. A well-known variant of this approach is for the patent owner to define “core” versus “non-core” applications of its patents to its business and grant nonexclusive licenses others for the non-core applications. Alternatively, instead of granting a single exclusive field-of-use license, the patent owner can define a number of non-overlapping applications of the patent, sometimes called “verticals,” and grant an exclusive license within each vertical to a different party. Finally, to the extent that several parties are in different businesses and they each have patents covering both their business and the business of the other party, they can enter into exclusive field-of-use cross-licenses, whereby each party aggregates an exclusionary position in its field of interest.
Another monetization model utilizing a licensing transaction involves the granting of a nonexclusive license coupled with the transfer of know-how, technical support, etc. This is generally referred to as a technology license and represents the difference between “stick” licenses (the assertion model) and “carrot” licenses (the business opportunity model). In addition to the conventional research and development (“R&D”) and intellectual property (“IP”) licensing functions required to produce the know-how, this model further requires some form of customer support activity. The customer support activity assists the customer in integrating the licensed technology into its products or processes.
The final category of IP monetization strategy is the spin out. It is not unusual for a company to spin-out (or spin-off) a particular corporate business unit, division, or technology that is either no longer “core” to the business of the company or is not sufficiently profitable. The divestiture can be complete, i.e., the seller retains no further interest in the divested business (spin-off), or the seller can maintain an ongoing financial stake in the new venture (spin-out). And, as in the case of sale of patents per se, the seller may want to retain limited rights to the IP that is owned by the new entity, e.g., by way of an exclusive field-of-use grant-back license. One of the most difficult, and often contentious issues in the divestiture of less than an entire business is which patent rights remain with the seller and which go with the spin-out. This is typically resolved with some combination of ownership allocation via assignment and licenses to the non-owning party, which may be limited to the field of the retained business, and may be exclusive or nonexclusive (usually depending on the respective leverage of the parties). An illustrative monetization vehicle is the formation of a joint venture around a new corporate entity and the transfer by one or more of the joint venture partners of a subset of their patent rights to the new entity. For example, an aircraft manufacturer may have patents covering a local area network (“LAN”) architecture for the control and communication systems on an aircraft, but the patent claims may be broadly written to cover “vehicles” rather than “aircraft.” The aircraft manufacturer could form a new entity joint venture with an automobile manufacturer. In exchange for equity in the new entity, the aircraft manufacturer would contribute an exclusive field-of-use license under its LAN patents in the automotive field, and the auto manufacturer could contribute operating capital and management expertise in the automotive area. Another example involves companies in complementary but noncompetitive fields pooling their expertise and IP in a new area that exploits both partners' capabilities. In such a case, each partner would grant an exclusive field-of-use license to the new entity limited to the field of the new entity's business (which is defined so as to not overlap with the business of either joint venture partner). In addition, one or more of the partners could contribute operating capital, unpatented know-how, machinery and equipment, technical employees, and/or management executives to the new entity.
Each of the aforementioned IP monetization strategies enables the corporate owner of non-core, stranded IP and perishable technology assets (i.e., patents, trade secrets, know-how, documentation, prototypes, pre-production units, production samples, tooling and demonstration frameworks) to derive value from what would otherwise be unproductive assets. They all share a unifying disadvantage, however. Specifically, the outright sale or divestiture of an intellectual property asset to a third party or spin out entity is a permanent, irrevocable act. If the acquiring party uses a proprietary IP position to build a fast-growing, profitable business, the party which transferred that IP position may regret what had seemed like a good decision at the time. In that regard, an overly cautious management team will have a tendency not to act at all rather than take the chance of transferring what might later become a significant business opportunity. Such caution may very well be justified given that the decision to grant a license to or transfer ownership of an IP asset or portfolio is often made at a very early stage—i.e., before an invention has been fully developed or test marketed to gauge its prospects for commercial success.
A continuing need therefore exists for an IP monetization system and method which enables the corporate owner to maximize its return on research and development investments while preserving flexibility in the decision making process for as long as possible.
A need also exists for a system and method for striking a risk-reward balance among one or more corporate owners of IP asset portfolios and selected investors that will promote the formation of new business structures and/or lead to the commercialization of emerging technologies which would otherwise go unexploited.
Yet another need exists for an automated system which serves as an efficient platform for focusing financial and management resources on certain classes of non-core stranded IP and perishable technology assets in order to improve the underlying technology through adaptation and validation, and to extend intellectual property protection.